Chicago mercantile exchange begins water trading: What’s happening

(ORDO NEWS) — Water futures contracts were launched on the CME Chicago Mercantile Exchange. This means that trading will take place on a par with oil and gold futures. Has water become such a valuable resource? Experts explained what could be the matter.

The exchange announced its plans back in September, when wildfires continued in the western United States. The idea has already passed all the necessary stages of approval, therefore, it will be possible to acquire the first water futures contract this week. According to traders, today the risks of water shortages are quite high, so it makes sense to trade in stocks.

Currently, 2 billion people around the world live in areas where water is regularly scarce. Over the next four years, a third of the world may face the problem. As a result, the value of water increases. Trading it will be no different from trading the same oil.

Futures is a security that gives the right to purchase an asset in the future at a previously agreed price. As a basis, the Chicago Stock Exchange took the California Water Resources Index, which has existed since 2018. Each week the value of the environmental right is adjusted. The water market is currently valued at $ 1.1 billion.

Incredible water has two liquid states

One contract will include 12.34 million liters of fluid. Futures will be a guarantee of stable water prices for the largest industrial consumers in California. In addition, they will act as a kind of indicator of the lack of water resources in the world.

Expiration of securities does not require water supply. The subject of exchange will be the difference in the amount between the transaction price and the asset price on the date of the contract execution.


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